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AP Microeconomics
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economics
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ap
Instructions:
Answer 50 questions in 15 minutes.
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Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Ed = (%dQd)/(%dP). Ignore negative sign
Price elasticity
Subsidy
Marginal tax rate
Derived Demand
2. Two goods are consumer substitutes if they provide essentially the same utility to consumers
Substitute Goods
Perfectly competitive long-run equilibrium
Negative externality
Inferior Goods
3. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF
Least-Cost Rule
Allocative Efficiency
Private goods
Constant cost industry
4. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power
Perfect competition
Price inelastic demand
Monopoly
Complementary Goods
5. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK
Utility Maximizing Rule
Profit Maximizing Resource Employment
Least-Cost Rule
Collusive oligopoly
6. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.
Economics
Monopoly long-run equilibrium
Non-collusive oligopoly
Price Ceiling
7. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received
Least-Cost Rule
Constrained Utility Maximization
Break-even Point
Price discrimination
8. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good
Income Effect
Spillover costs
Total Revenue
Substitution Effect
9. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry
Producer surplus
Profit Maximizing Resource Employment
Oligopoly
Private goods
10. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage
Market Equilibrium
Comparative Advantage
Marginal Resource Cost (MRC)
Law of Diminishing Marginal Utility
11. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources
Income Elasticity
Normal Profit
Constrained Utility Maximization
Explicit costs
12. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur
Absolute Advantage
Dead Weight Loss
Market power
Implicit costs
13. Exists if a producer can produce more of a good than all other producers
Price Elasticity of Supply
Collusive oligopoly
Price inelastic demand
Absolute Advantage
14. The practice of selling essentially the same good to different groups of consumers at different prices
Law of Supply
Perfectly competitive long-run equilibrium
Price discrimination
Necessity
15. When firms focus their resources on production of goods for which they have comparative advantage
Average Product of Labor (APL)
Cross-Price Elasticity of Demand
Total Revenue
Specialization
16. Occurs when LRAC is constant over a variety of plant sizes
Economics
Price discrimination
Negative externality
Constant Returns to Scale
17. A good for which higher income increases demand
Normal Goods
Scarcity
Collusive oligopoly
Price floor
18. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax
Excise Tax
Allocative Efficiency
Total Fixed Costs (TFC)
Total Product of Labor (TPL)
19. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly
Subsidy
Price elasticity
Normal Goods
Four-firm concentration ratio
20. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary
Market power
Cross-Price Elasticity of Demand
Least-Cost Rule
Perfectly competitive long-run equilibrium
21. Ed = 1
Price elasticity
Unit elastic demand
Monopsonist
Total Welfare
22. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit
Determinants of Demand
Monopoly long-run equilibrium
Perfect competition
Private goods
23. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC
Total Revenue
Total Revenue Test
Income Elasticity
Profit Maximizing Resource Employment
24. Ed < 1
Profit Maximizing Resource Employment
Producer surplus
Determinants of Demand
Price inelastic demand
25. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run
Constrained Utility Maximization
Determinants of elasticity
Shutdown Point
Economies of Scale
26. The difference between total revenue and total explicit costs
Price floor
Accounting Profit
Economic Profit
Absolute Advantage
27. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good
Law of Increasing Costs
Excise Tax
Public goods
Oligopoly
28. The difference between total revenue and total explicit and implicit costs
Marginal Product of Labor (MPL)
Economic Profit
Law of Supply
Price floor
29. Ed > 1 - meaning consumers are price sensitive
Price discrimination
Price elastic demand
Constant Returns to Scale
Least-Cost Rule
30. Models where firms agree to mutually improve their situation
Total Product of Labor (TPL)
Collusive oligopoly
Explicit costs
Total Welfare
31. The additional cost incurred from the consumption of the next unit of a good or a service
Production function
Economic Profit
Perfect competition
Marginal Cost (MC)
32. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital
Four-firm concentration ratio
Producer surplus
Fixed inputs
Relative Prices
33. MUx / Px = MUy/Py or MUx/MUy = Px/Py
Resources
Economic Profit
Utility Maximizing Rule
Excise Tax
34. Ed = 0 - no response to price change
Non-collusive oligopoly
Perfectly competitive long-run equilibrium
Perfectly inelastic
Negative externality
35. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials
Scarcity
Variable inputs
Price Elasticity of Supply
Price Ceiling
36. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter
Surplus
Relative Prices
Unit elastic demand
Determinants of elasticity
37. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity
Shutdown Point
Marginal Productivity Theory
Explicit costs
Monopolistic competition
38. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit
Allocative Efficiency
Price elasticity
Long Run
Price elastic demand
39. The lost net benefit to society caused by a movement away from the competitive market equilibrium
Marginal Productivity Theory
Monopolistic competition
Dead Weight Loss
Positive externality
40. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.
Average Total Cost (ATC)
Marginal Revenue Product (MRP)
Incidence of Tax
Consumer surplus
41. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately
Normal Goods
Marginal tax rate
Specialization
Complementary Goods
42. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.
Market Equilibrium
Allocative Efficiency
Surplus
Collusive oligopoly
43. All firms maximize profit by producing where MR = MC
Profit Maximizing Rule
Total Revenue
Collusive oligopoly
Monopolistic competition long-run equilibrium
44. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it
Free-Rider Problem
Explicit costs
Constant cost industry
Production function
45. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices
Market Economy (Capitalism)
Four-firm concentration ratio
Monopsonist
Shutdown Point
46. The imbalance between limited productive resources and unlimited human wants
Scarcity
Substitute Goods
Oligopoly
Relative Prices
47. The output where ATC is minimized and economic profit is zero
Break-even Point
Public goods
Economic Profit
Profit Maximizing Rule
48. The change in quantity demanded resulting from a change in the price of one good relative to other goods
Perfectly elastic
Substitute Goods
Inferior Goods
Substitution Effect
49. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.
Fixed inputs
Diseconomies of Scale
Private goods
Economic Growth
50. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.
Monopolistic competition long-run equilibrium
Profit Maximizing Rule
Price elastic demand
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